Whether inheritance, relocation or separation – there are some situations in life that make you consider what to do with your own house. If you don’t want to or can’t live in the property yourself, the first question is whether you should sell it or rent it out. Read here about the advantages and disadvantages of both options for you as the owner, what is most worthwhile in your case, and what to consider when making a decision .
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1. Should I sell my house or rent it out?
There is certainly no one-size-fits-all answer to the question of whether it makes more sense to sell a house or rent it out. If you own a house that you don’t want to or can’t occupy yourself (at least for now), there are a few aspects you should consider when deciding between selling and renting to weigh which option is most worthwhile in your case. The individual circumstances and requirements of the homeowner must be considered. For example, the following questions need to be answered when deciding between selling and renting:
What is the value of the property and the possible return on investment??
How much is the house worth? Would a sale or a rental (in terms of possible sales proceeds or rental yield) be the more profitable alternative?? How old is the house?
Are you and the house legally or financially bound to obligations or co-decision makers?
Are you the sole owner of the house? Have you inherited the house and is there a community of heirs that must be included in the decision?? Is the house already paid off or are you still financing it with a current loan and do you have to pay an early repayment penalty to the bank when you sell it??
What is your personal and financial situation?
How long has the house been in your possession?? Is owner-occupancy only an option for you at the moment or is it generally out of the question?? In what way should the assets tied up in the house be made usable in the future??
In the following we give you a detailed information about financial and fiscal as well as legal and organizational aspects as a decision basis for a renting or a sale of your house.
2. Sell or let – What is worthwhile financially?
When choosing between selling and renting, the first question many owners ask themselves is: what is more lucrative?? In addition to the current market situation and real estate prices in your region, you should make the decision depending on your financial situation. Weigh whether it is more advantageous for you to receive all of the sales proceeds in the short term or instead to have a steady income through regular rental income.
With the inflow of liquidity from a large sale proceeds, you can use the sum for other large investments or costs, for example, to pay off an existing loan or buy a new house. Otherwise, there is also the possibility of investing the sum of money. However, with classic investments, the return is usually lower than with rental yields due to the current low interest rates. In addition, the monetary value of traditional investments decreases over time due to inflation.
The rental yield is generally calculated by putting the annual rental income in relation to the purchase price of the property. It is considered a largely inflation-proof and reliable source of income that can also serve as a retirement provision. A good rental yield is usually considered to be a percentage starting at around four percent. However, it also depends on the type of property. Use the relevant rent schedule as a guide for annual rent. For deciding whether to sell or rent your house, a house valuation can be of help. If you know the current value of your house, you have a reference point in terms of the possible sale price or the possible rental return.
The rental yield often offers a long-term stable source of income. At the same time, there is a future possibility to use the house for oneself or to sell it. Nevertheless, there are also some risks when you rent out your home. For example, rent defaults can occur if the tenants can no longer afford the rent or you get to rent nomads. In this case, as a landlord, you will have to face financial arrears and pay running costs out of your own pocket. Furthermore, renting (not only with rental nomads, but also with ordinary tenants) usually leads to wear and tear on the house, which in turn can have a negative impact on the house value. When selling the house, you as the owner, apart from how you manage the proceeds of the sale, have a lower financial risk.